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When discussing personal finance or stewardship. One question comes up when I start talking about budgets.

“Why do I need a budget?”

I normally respond, “The same reason you need a map or a GPS.”

A budget tells you how you are going to get to where you want to go. Of course, that assumes you already know where you are and where it is you want to go with your money. Many people don’t. A budget will also answer the question “Where am I now?” from a financial perspective.

Why do I need a budget?

It is possible to get where you want to go without a map or a GPS if you are familiar with the area and you pay attention. However, if you are in unfamiliar territory or don’t pay close attention then it will be difficult to get from point A to B. Don’t think of a budget as a chain to keep you in line. It is a tool to achieve your goals. You can use it to get out of debt, or to give more to those in need or what ever goal you feel called to.

How can I set up a budget?

Setting up a budget can take many forms and I will talk about them at length on this site. But, first I want to give a general overview of the concept.

Know where you are.

Many people I talk to about their finances don’t have a very good idea of where they stand financially. I ask them to keep track of every penny for thirty days and to break down their spending in to different categories. This can be done in a notebook, on a smartphone or with something like mint.com but doing it will give you some good information.

You will know where your money is going.

You will know where it isn’t going. (Which can be just as important)

You will know if you are spending more than you are making regularly.

These answers will give you a good idea of where you are financially. It may not be a pretty picture, but it is your picture and now you know what you can do to improve it or overhaul it completely.

Know where you want to be.

You really can’t make a plan until you know where you want to be. Do you want to spend less so you can get out of debt? Do you want to be able to give more to your church or ministry? Do you want to stop losing ground and spend less than you make?

These decisions are, of course, very personal ones and it is something you will need to decide on your own (with your spouse) or with good council. Getting an outside opinion can be embarrassing but I have found that asking someone who isn’t emotionally involved in the details can often offer insight you wouldn’t have gotten otherwise.

So, you’ve read part one of this series you know why you should have a budget and how it can help you answer some fundamental questions. If you haven’t read it; read it now. In this article the question is “how do I create a budget?” If you have never actually had a written budget it may feel complex. Figuring out how to create a budget can feel confusing, but it doesn’t have to be.

When I talk with people one on one I usually recommend one or two methods depending on the preference of the individual. I will talk through both here.

Create a budget on Paper.

Gather up all of your bills for the past month.
If you don’t have them from last month then keep them when they come this month.

Track every penny you spend.
Do it in a notebook, or keep receipts of your spending or use one debit card for all spending then use the statement to actually make your budget you won’t have to guess.

Put it down on paper.
If you don’t want to create your own there are plenty of places to find budget templates. However, searching those out may lead to more confusion so here is a simple budget template to get you started.

Fill in the green spaces that apply to you and the yellow column on the right will tell you what percentage of your income you are spending on any particular category.

You may not need every single line so only use what suits you. I actually find it most useful to keep categories as broad as possible. But, you need to do what is right for you and knowing that takes experience, so play with it.

My wife and I have gone through dozens of forms of budgets in our time of trying to organize our finances.

Create a budget with Mint.

Mint is a free online personal finance program. (Also available on mobile platforms) It is owned by Intuit the same company that owns Quicken and many other programs. They have been in the business for a long time and they are very reputable and secure.

Sign up for an account on mint.com

Register your primary spending accounts

Mint will automatically pull in your all of your account activity and automatically categorize it for you. (Watch out they are not always accurate)

Use Mints built in budgeting feature to set up the categories for your spending. Mint will let you know how much you have left in every category. You can even set up a alerts to let you know.

Having a budget down on paper, even digital paper is the first step in getting your personal finances under control. There is something about actually writing things down that acts as a commitment device. But, understand that a budget isn’t set in stone. Month to month things may vary and you will have to account for that. For the first few months you should keep a close eye on things and maybe make adjustments as needed.

Great so now you have a budget written down and you are all ready to have your spending under control. How can you improve your budget? Pay attention to it for starters. The biggest mistake people make is to ignore the budget they have just put together. It is easy to assume that everything will take care of itself now that your monster spread sheet is put together or that you have set everything up on mint.com. But, alas, it simply isn’t that easy.

I will let you in on something, even if you used my budget template as I suggested, you forgot something on your budget. There is a bill that will come due that wasn’t part of your initial tracking period. That is OK. You will just need to adjust your budget now. Is it ok to change your budget? If it is intentional, absolutely. The problem arise when you simply overspend, without planning. You will need to adjust your budget several time until you have it to a good place and then you will, hopefully, get a raise or something else will change in your financial life that will require you to change or even rewrite your budget.

Understanding that your budget is a living document will help you not stress out when things come up that you require you to make adjustments.

What could I have forgotten?

Did you put money aside for the Holidays? That is one of the biggest times to destroy your budget. Save money for travel, gifts and extra workout equipment to get rid of those holiday meals meals.

I liked to say, when I was a youth pastor, “There is a non-smoking, virgin section of hell.” My point was that being a follower of Christ is more than just not doing the wrong things, or even doing the right things. It is easy to fall into this same trap with money. Most people who write about the money miss this point entirely. I wrote about money years ago and I missed this point a lot. It is why I want to write about biblical stewardship now. You can spend less than you make, pay off all of your debt and give the magic amount to your church and still not have God in the center of your financial life.

We each have some sinful way of looking at money; I look at money to keep me safe. I look at money to be my functional savior and it ends up being my master. How many of us are now working harder than we want to work to pay for things we purchased long ago or things we think we need to keep up with our neighbors. We can easily become slaves to our desire for money.

Some people have shunned money and taken on a poverty theology some have tried to use Jesus as their personal ATM loving money more than God. Both of these ideas are sinful and will lead us toward a sinful way of handling our money. We need to look at money as a tool to be used and stewarded just like anything else in our lives. Money should be used properly to the glory of God and that should be our goal as Christians.